ESTABLISHMENT OF PROJECT OFFICE IN INDIA
Foreign Company incorporating a Subsidiary Company / Private Limited Company in India for a particular small project may face many issues including:
- Wastage of time and resources
- Heavy compliance requirement
- Time consuming closure proceedings
In order to curb such issues and to make entry and exit easy for the Foreign Company the Reserve Bank of India has granted general permission to foreign companies to establish Project Offices in India, Provided they have secured a contract from an Indian company to execute a project in India and
- The project is funded directly by inward remittance from abroad or
- The project is funded by a bilateral or multilateral International Financing Agency or
- The project has been cleared by an appropriate authority or
- A company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.
PROCEDURE FOR ESTABLISHING PROJECT OFFICE (PO):
- The application for establishment of PO in India, to be submitted by the Non-Resident in Form FNC to a designated AD Category 1 Bank (AD Bank), along with the prescribed documents mentioned in the Form FNC and the LOC i.e. Letter of Comfort (An applicant that is not financially sound and is a subsidiary of another company may submit a Letter of Comfort from its parent/ group company, subject to the condition that the parent/ group company satisfies the prescribed criteria for net worth and profit).
- AD Bank after Scrutinizing the application and compliance with the extant KYC norms allow establishment of Project Office in India.
- The validity period of the project office is for the tenure of the project.
- On receipt of permission for setting up of project office in India, the applicant has to inform AD Bank, the date on which Project Office has been established. AD bank shall in turn inform RBI accordingly.
- In case the permission granted has been surrendered or expired and no project office has been setup the AD Bank shall inform RBI accordingly.
- The applicant is required to set up the project office within six months of receipt of approval letter. Failing this approval may lapse. For reason beyond control AD bank may grant extension for a further period of six months. Any further extension shall require prior approval of RBI.
Registration with police authorities: However, Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan desirous of opening Project Office(s) in India shall have to register with the state police authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi for necessary action and record.
PROCEDURE FOR CLOSING A PROJECT OFFICE (PO):
Requests for closure of the PO and allowing the remittance of winding up proceeds of PO may be submitted to the designated AD Category - I bank (AD Bank) by the PO or their nodal office, as the case may be. Following documents are required:
- Copy of the Reserve Bank's/AD Bank approval for establishing the PO.
- Auditor's certificate :
- Indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant and indicating the manner of disposal of assets;
- Confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc. of the office have been either fully met or adequately provided for; and
- Confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India.
- Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the PO and there is no legal impediment to the remittance.
- The designated AD Bank has to ensure that the PO had filed their respective Annual Activity Certificate(s).
- Any other document/s, specified by Reserve Bank of India/ AD Bank while granting approval.
Designated AD Category-I bank may allow remittance of winding up proceeds in respect of offices of banks and insurance companies, after obtaining copies of permission of closure from the sectoral regulators along with the documents mentioned above.
ANNUAL COMPLIANCE - ANNUAL ACTIVITY CERTIFICATE (AAC)
The concerned Project Office needs to submit along with the required document(s) AAC as at the end of March 31 each year. PO needs to submit the AAC to the designated AD bank. India being one of the fastest growing economy, such efforts of “Ease of doing business in India” will allow more and more foreign party(s) to establish their business in India.
Contact PKP for Project Office
Contact Person : Mr. Prakash k Gupta
Email - email@example.com
Telephone Numbers : +91-11-23382207/ 23388753
Mobile Number : + 91- 9811031841